Snam S.p.A. · MIL:SRG
Snam — FY2014 Earnings Presentation
45 slides from Snam's earnings presentation, Mar 12, 2015
Slide 1: 2014 Full Year Results & Strategy Update
2014 Full Year Results & Strategy Update Milan, March 12th, 2015 snam.it
Slide 2: Outline
Outline Highlights and Operational Performance 2014 Consolidated Results 2015-2018 Strategy & Targets 2
Slide 3: 2014 Highlights and Operational Performance
2014 Highlights and Operational Performance Carlo Malacarne Chief Executive Officer 3
Slide 4: 2014: Another Year of Positive Outcomes
2014: Another Year of Positive Outcomes [ € mn ] • Revenues 3,566 Up 1.0% Solid Results • Ebitda 2,776 Down 1.0% • Net profit 1,198 Up 30.6% [ € mn ] • Total Investments 1,820 • Capex 1,313 Sound Growth & • Financial investments 507 Cash Flow generation • Operating Cash Flow 1,529 • Net debt 13,652
Slide 5: 2014 FY Consolidated Results
2014 FY Consolidated Results Antonio Paccioretti Chief Financial Officer 5
Slide 6: Income Statement
Income Statement [ € mn ] 2013 2014 Change Revenues 3,529 3,566 +37 Operating expenses - 726 - 790 - 64 EBITDA 2,803 2,776 - 27 Depreciation & amortisation - 769 - 803 - 34 EBIT 2,034 1,973 - 61 Net interest income (expenses) - 472 - 397 +75 Net income from associates 45 131 +86 EBT 1,607 1,707 +100
Slide 7: Revenues
Revenues [ € mn ] 2013 2014 Change Regulated revenues 3,491 3,506 +15 Transport 1,878 1,895 +17 Distribution 1,008 1,017 +9 Storage 444 458 +14 LNG 22 19 -3 Pass-through revenues 139 117 -22 Other revenues 38 60 +22 TOTAL REVENUES 3,529 3,566 +37 7
Slide 8: Operating Expenses
Operating Expenses € mn ] [€m 2013 2014 Change Regulated activities 682 750 +68 Controllable fixed costs 460 471 +11 Variable costs 18 8 -10 Other costs 65 154 +89 Pass-through costs 139 117 -22 Non regulated activities 44 40 -4 TOTAL COSTS 726 790 +64 [€m € mn ] 2013 2014 Change Cost breakdown by b
Slide 9: EBIT Analysis
EBIT Analysis [ € mn ] 2.200 +0.4% net of one-off items 2.100 37 26 -3.0% reported 16 (11) 2.000 (34) (95) 1.900 1.800 2,034 1,973 1.700 1.600 1.500 EBIT Regulated Controllable Depreciation Other 2013 early 2014 one-off EBIT 2013 revenues fixed costs & amortisation retirement plan risk fund 2014 pro
Slide 10: Income from Associates
Income from Associates [ € mn ] 2013 2014 Change Distribution in Italy 59 98 +39 AES Torino 36 20 -16 Toscana Energia 19 23 +4 Other equity interests 4 3 -1 Restatement of equity interest (AES Torino) - 52 +52 International activities -14 33 +47 Interconnector UK 12 9 -3 TIGF -27 24 +51 INCOME FROM
Slide 11: Net Profit Analysis
Net Profit Analysis [ € mn ] +€281 mn; +30.6% reported 1.300 +€144 mn; +15.4% adjusted 120 1.200 1.100 70 86 1.000 17 75 900 1,198 800 (87) 1,078 700 917 934 600 500 Net profit Early Adj. Net profit Adj. EBIT Net interest Net income Income Adj. Net profit Robin Hood Net profit 2013 retirement 2013 i
Slide 12: Main Financial Actions and Results in 2014
Main Financial Actions and Results in 2014 2014 Actions Results consistent with last year’s guidance • New recourse to Debt Capital • Significant cost of debt reduction • Average tenor of M/L term debt: Market (€1.75 billion) approx. 5 years • Pool and bilateral banking facilities • Fixed/variable r
Slide 13: Cash Flow from Operation and Net Investments
Cash Flow from Operation and Net Investments Cash flow from operation Net investments [ € mn ] [ € mn ] -275 606 -505 502 1,529 1,198 -1,229 -1,232 Net profit Depreciation Change in Cash flow Net TAG Capital Net investments & other working from capex acquisition increase not monetary capital operati
Slide 14: Net financial Debt – 2014 vs. 2013
Net financial Debt – 2014 vs. 2013 [ € mn ] +326 118 505 -1,529 1,232 13,652 13,326 2013 Cash flow Net investments Cash flow from AES debt 2014 from operation Shareholders’ consolidation equity and other (dividends) 14
Slide 15: Balance Sheet
Balance Sheet Dec, 31 Dec, 31 [€m € mn] Change 2013 2014 Net invested capital 19,320 20,824 +1,504 Fixed capital 20,583 21,813 +1,230 Tangible fixed assets 14,847 15,335 +488 Intangible fixed assets 4,710 5,076 +366 Equity-accounted and other investments 1,026 1,402 +376 Net working capital -1,155 -
Slide 16: 2015-2018 Retaining Focus on Sustainable Remuneration
2015-2018 Retaining Focus on Sustainable Remuneration Carlo Malacarne Chief Executive Officer 16
Slide 17: A robust Strategy with a low-risk Profile
A robust Strategy with a low-risk Profile Selective Italy: aiming at high-quality investment opportunities portfolio Europe: focusing on two strategic gas corridors and management providing country risk diversification Operational Progressing from asset owner to market facilitator management Keeping
Slide 18: Outline
Outline Business Environment Snam Business Development 18
Slide 19: Key European Gas Market Trends
Key European Gas Market Trends Gas demand in EU Gas supply reserves and flows [bcm] 600 North Sea 3.7 TCM Gas Reserves Russia 49.5 TCM Gas Reserves 400 Northern Europe 65% of additional import needs in 2020 Net import CAGR 13 – 30: +1% Caspian Sea 11.3 TCM 200 Southern Europe Gas Reserves 35% of add
Slide 20: Seeking a New Equilibrium between Flexibility and Security of Supply
Seeking a New Equilibrium between Flexibility and Security of Supply 2013 storage capacity1 (bn cubic meters) • Competition in the market has generated a surge in liquidity that eased a shift from «take or pay» to «spot» contracts 5.4 • «Spot» contracts open up to commercial 4.9 22.3 opportunities r
Slide 21: The shifting Market Scenario…
The shifting Market Scenario… Competition & new Gas demand contract terms Infrastructure Operators New services & activities Gas supply …creates opportunities for infrastructure operators to provide new dedicated investments and services 21
Slide 22: Italian Distribution Business moving towards Consolidation
Italian Distribution Business moving towards Consolidation Streamlining of Italian operators Further concentration to come 730 • Process supported by new legislative framework • Concession areas reduced from 6,700 430 to 177 • Concessions to be awarded by tender offer with standardized rules and wit
Slide 23: Outline
Outline Business Environment Snam Business Development • Capex in Italy • Operational Management • European Developments • Financial Discipline • Attractive Returns 23
Slide 24: Snam Investment Priorities in Italy
Snam Investment Priorities in Italy: in line with market trends and consistent with EU and Italian legislation Transport & LNG Storage Distribution • Selected projects to meet new • Finalize capacity increase for: • Development of new distribution CAPEX flexibility requirements and supply • Modulati
Slide 25: Consolidated Capex Plan in Italy 2015 – 2018
Consolidated Capex Plan in Italy 2015 – 2018 Capex in Italy Consolidated RAB1 Capex by remuneration type2 RAB with higher remuneration Base remuneration Higher remuneration RAB with base remuneration CAPEX IN ITALY 75% CAGR 1% OPERATIONAL MANAGEMENT €5.1 bn* ~30% ~70% EUROPEAN 1/3 DEVELOPMENTS on a
Slide 26: Transport: main projects
Transport: main projects 2015 2016 – 2018 € ~0.7 bn € ~2.4 bn Passo Gries Tarvisio CAPEX North gas market and IN ITALY reverse flow capacity developments 29% Main projects OPERATIONAL MANAGEMENT • Po Valley Infrastructure (~450 km ) 57% • Empowerment/construction of compressor EUROPEAN stations (~10
Slide 27: Gas Flow Trends in Italy
Gas Flow Trends in Italy Import transport capacity to accommodate Italian gas flows more diversified gas flows [Mscm/d] TARGET CAPACITY DEVELOPMENT [bcm] Import DERIVING FROM CAPEX BEYOND 2018 Gas Demand CAGR 14 – 25: CAGR 14 – 25: 347 ~370 90 ~1% ~2% CAPEX IN ITALY 80 Transit OPERATIONAL 70 MANAGEM
Slide 28: Storage: investments to ensure gas system liquidity
Storage: investments to ensure gas system liquidity 2015 2016 – 2018 Peak capacity Modulation capacity Key investment priorities € ~0.2 bn € ~0.3 bn [ Mscm/d ] [ bcm ] CAPEX IN ITALY • Complete capacity development + 11% required by legislative Decree OPERATIONAL + 8% 12.6 130/2010 MANAGEMENT 11.4 •
Slide 29: Distribution: selected investments
Distribution: selected investments… 2015 2016 – 2018 Consolidated redelivery points (mn) Key investment priorities € ~0.4 bn € ~1.1 bn CAPEX IN ITALY • Replacement of existing ~6.6 6.4 pipes OPERATIONAL + 3% MANAGEMENT 29% • New connections and EUROPEAN DEVELOPMENTS development of new FINANCIAL dist
Slide 30: Italgas holds a Leading Position…
Italgas holds a Leading Position… Concession area renewal Italgas to seek additional value schedule* Italgas positioning through tender process 96% 2016-2018 BZ • Optimization of concession BL UD1 SO BS1 TN2 PN VB TN1 UD2 CAPEX AO NO1 VA1 VA2 CO2 CO1 LC1 BG1 lc2 bg3 bg4 BG2 BS2 TN3 VI3 VI2 TV1 TV2 V
Slide 31: New Services to enhance Snam’s Role as System Operator
New Services to enhance Snam’s Role as System Operator Several incentive schemes already identified… New Service Areas New Revenue Stream TO SUPPORT REVENUE STREAM CAPEX IN ITALY • Intensive cooperation with market operator OPERATIONAL • Spot and futures markets MANAGEMENT Gas Physical • European Ca
Slide 32: Operational Efficiency: proven track record of controlling cost
Operational Efficiency: proven track record of controlling cost… Optimal efficiency level in a growing business (€ mn controllable fixed costs, nominal value) KPI 2014-2018 CAGR CAPEX 497 480 471 TRANSPORT IN ITALY 465 456 453 460 Controllable fixed costs/ OPERATIONAL network Km MANAGEMENT Network K
Slide 33: European Development: focus on North-South and East-West corridors
European Development: focus on North-South and East-West corridors Key pillars Snam’s geographic footprint • Optimize the return on current asset base CAPEX IN ITALY in a broader European context OPERATIONAL MANAGEMENT • Integrated management of the North-South EUROPEAN DEVELOPMENTS corridor, coordi
Slide 34: TIGF: a priority asset
TIGF: a priority asset Strategic rationale Expected contribution since the acquisition • Key position along the East-West energy corridor • Yearly EPS accretion around 2% • Diversification of regulatory and country risk over 2015-2018 plan • Development opportunities • Value creation from French gas
Slide 35: TAG: a perfect fit for Snam’s strategy
TAG: a perfect fit for Snam’s strategy Strategic rational Expected contribution since the acquisition • The largest import pipeline bringing Russian gas • Full visibility on revenues: from Austrian/Slovak border to Italy • Regulated business, remuneration set on capacity CAPEX IN ITALY • Diversifica
Slide 36: Net income from Associates
Net income from Associates 2014 2015E 2018E CAPEX IN ITALY € ~130 mn OPERATIONAL Growth MANAGEMENT € ~100 mn supported EUROPEAN €79* mn by TAG and DEVELOPMENTS TIGF FINANCIAL DISCIPLINE Net income ATTRACTIVE from Associates RETURNS Growth fuelled by International Assets 36 * Excluding the non recurr
Slide 37: Balance Sheet Solidity and Financial Structure Efficiency…
Balance Sheet Solidity and Financial Structure Efficiency… Snam’s key credit metrics 2013 2014 A solid investment grade FFO / Net Debt ~12% ~13% profile Net Debt/(RAB+associates) ~53% ~52% CAPEX IN ITALY OPERATIONAL MANAGEMENT Focused and proactive YE 2013 YE 2014 EUROPEAN DEVELOPMENTS management of
Slide 38: … to support a Sustainable Path
… to support a Sustainable Path Fixed rate bond roll-over (2015-18) – Potential benefits • From refinancing risk to cost savings opportunities [ Coupon % ] • Open and deep financial markets with favorable interest 5,00% rates and credit spreads 4,50% • Managing future refinancing exercises exploitin
Slide 39: In Summary
In Summary • Strong balance sheet • Sound results further fuelled by International assets • Constantly pursuing operational and financial efficiency CAPEX IN ITALY • Restored financial flexibility OPERATIONAL MANAGEMENT • Focus on customer service improvement EUROPEAN DEVELOPMENTS • Robust business
Slide 40: Q & A Session
Q & A Session 40
Slide 41: Annexes
Annexes 41
Slide 42: Italian Gas Market in 2014
Italian Gas Market in 2014 Gas Consumption (Weather adj.): -4.5% Gas injected into the network: -9.7% 70.1 69.0 67.0 Other Sectors 1.9 62.3 2.1 Thermoelectric 20.6 17.7 16.5 16.3 Industrial(*) Residential & commercial 31.1 30.9 1 2013 2 2014 2013 2014 (*) Includes: NGV, Agriculture and Non-Energy Us
Slide 43: Operational Data
Operational Data 2013 2014 Δ% Transport Gas injected into the network (bcm) 69.0 62.3 -9.7 Gas pipeline network (km in operation) 32,306 32,339 +0.1 Storage Storage capacity (bcm) 15.9 15.9 -- • Modulation (*) 11.4 11.4 -- • Strategic 4.5 4.5 -- Gas moved through storage system (bcm) 18.42 15.70 -14
Slide 44: Disclaimer
Disclaimer Snam’s Chief Financial Officer, Antonio Paccioretti, 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 correspon
Slide 45: 2014 Full Year Results & Strategy Update
2014 Full Year Results & Strategy Update Milan, March 12th, 2015 snam.it