Liquefied Natural Gas (LNG) regasification

The LNG regasification service

Natural gas is also injected into the national transportation network from the LNG terminal at Panigaglia (La Spezia), which is owned by GNL Italia. Here, it can regasify 17,500 cubic meters of LNG per day, thus when operating at maximum capacity, the terminal can inject over 3.5 billion cubic meters of natural gas into the transportation network annually. The regasification service includes unloading the LNG from the vessel, operating storage, i.e., the storage time required for vaporising the LNG, regasifying it and injecting it into the national network at the Panigaglia entry point. The regasification service can be either continual for the entire thermal year or work on a spot basis. Ancillary services are also available, such as correcting the heating power of the natural gas to comply with quality requirements for its injection into the transportation network (correction of the Wobbe index).

Key performance indicators (€ million) 2008 2009 2010 Change Change %
Core business revenue (*) (**) 37 36 35 (1) (2.8)
- of which LNG regasification revenue 20 21 24 3 14.3
Operating costs (**) 30 27 24 (3) (11.1)
EBIT 5 5 7 2 40.0
Investments 6 7 3 (4) (57.1)
Volumes of LNG regasified (billions of cubic metres) 1.52 1.32 1.98 0.66 50.0
Tanker loads (number) 42 38 54 16 42.1
Employees in service at December 31 (number) 93 87 70 (17) (19.5)

(*) Core business revenue includes the recharging to customers of costs relating to the natural gas transportation service provided by Snam Rete Gas S.p.A. For purposes of the consolidated financial statements, these revenues, together with transportation costs, are charged to GNL Italia S.p.A. to show the scale of the operation.
(**) Before consolidation adjustments.

Financial results

LNG Regasification revenue amounted to €24 million in 2010, a year-on-year increase of €3 million, or 14.3%. This rise was due mainly to higher volumes of LNG regasified (+0.66 billion cubic metres; +50%).

EBIT totalled €7 million, an increase of €2 million, or 40%, compared with 2009. The rise was mainly due to higher revenue from the LNG regasification service.

Operating review

Quantities of regasified LNG per user (billions of m3) 2008 2009 2010 Change Change %
Enel Trade 1.23 1.01 1.28 0.27 26.7
Eni 0.29 0.10 0.22 0.12
Other 0.21 0.48 0.27
1.52 1.32 1.98 0.66 50.0

In 2010, the Panigaglia LNG terminal in the province of La Spezia regasified 1.98 billion cubic metres of natural gas (compared with 1.32 billion cubic metres in 2009), unloading 54 methane tankers of various types, including three spot loads (compared with 38 tankers in 2009, including five spot loads).

Investments

Investments in 2010 amounted to €3 million, a decrease of €4 million compared with the previous year.

Adaptation and modernisation of Panigaglia plant

The Environmental Impact Assessment (EIA) of the plans to expand and modernise the GNL Italia regasification terminal at Panigaglia was completed successfully on September 9. The decree was signed by the Italian environment and culture ministries.

Regulation

Volumes of regasified LNG and number of tanker loadsResolution ARG/gas 92/08 - “Criteria for the determination of the tariffs for the regasification service and amendments to Resolutions no. 166/05 and no. 11/07”.

With Resolution ARG/gas 92/08, published on 9 July 2008, the Authority for Electricity and Energy defined the tariff criteria for the regasification service applicable for the third regulatory period (1 October 2008-30 September 2012).

The mechanisms already in effect in the second regulatory period were confirmed for determining the base revenues, including the real return on net invested capital of 7.6% before taxes. In regard to the tariff structure, the breakdown of revenues into a regasification capacity component and a regasified volumes component was maintained, at a ratio of 90/10 (80/20 in the second regulatory period).

The tariffs are updated using the price cap methodology applied only to the component relating to operating costs, with a productivity recovery coefficient of 0.5%.

The revenue component relating to the return and amortisation and depreciation is updated on the basis of an annual recalculation of invested capital and additional revenues from the incentives for investments realized in prior regulatory periods.

Incentives for new investments involve the payment of a return increased by three percentage points compared to that paid for capital at the end of 2007, for a duration of 16 years. Both the increase in the rate of return and the duration are differentiated depending on the type of investment.

Resolution ARG/gas 102/09 - “Approval of the tariff proposals for the regasification service for thermal year 2009-2010 for GNL Italia S.p.A. and Terminale GNL Adriatico S.r.l., in implementation of Resolution ARG/gas 92/08 issued by the Authority for Electricity and Gas on 7 July 2008.”

With this provision, which was published on 29 July 2009, the Authority for Electricity and Gas approved the tariffs for the regasification service provided by GNL Italia for thermal year 2009-2010, pursuant to Resolution ARG/gas 92/08. The tariffs were set on the basis of the base revenues of €25 million. The net capital invested as at 31 December 2008 (RAB) was equal to €105.9 million.

Resolution ARG/gas 54/10 - “Modification of Article 11 of Resolution no.167/05 issued by the Authority for Electricity and Gas on 1 August 2005 containing provisions in the event of failure to use the regasification capacity.”

With Resolution ARG/gas 54/10, published on 15 April 2010, the Authority for Electricity and Gas introduced a tolerance of 10% on the complete use of the capacity provided in order to determine any release of capacity commensurate with the flexibility of supply contracts, to achieve greater flexibility in accessing the regasification service. Pursuant to the aforementioned provision, GNL Italia proposed to amend its own regasification code.

Resolution ARG/gas 90/10 - “Deployment of the process for the establishment of provisions referring to the payment of costs for the restoration of liquefied natural gas regasification terminals.”

With this provision published on 21 June 2010, the Authority for Electricity and Gas began a procedure for the establishment of provisions aimed at recognising the restoration costs for GNL sites in tariffs.

Resolution ARG/gas 108/10 - “Approval of the tariff proposals for the regasification service for thermal year 2010-2011 for GNL Italia S.p.A. and Terminale GNL Adriatico S.r.l., in implementation of Resolution ARG/gas 92/08 issued by the Authority for Electricity and Gas on 7 July 2008.”

With this provision, which was published on 19 July 2010, the Authority for Electricity and Gas approved the tariffs for the regasification service provided by GNL Italia for thermal year 2010-2011, pursuant to Resolution ARG/gas 92/08. The tariffs were set on the basis of the base revenues of €25.6 million. The actual revenues for thermal year 2010-2011 must take into account the regasified volumes. The net capital invested as at 31 December 2009 (RAB) is equal to €109.7 million.