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Business model GRI - G4: 2

Snam operates in a regulated market and is faced with business dynamics influenced by complex, changing energy scenarios, in addition to the impact of the economic and social crisis of recent years, which, in our country in particular, resulted in the reduction of disposable income, loss of the system’s competitiveness and the resulting gradual reduction in consumption.

According to the IEA (International Energy Agency), over the next 25 years there will be an increase in the demand for energy at the global level, with gas growing at a faster pace than any other fossil fuel from now until 2040. European demand for gas will remain largely unchanged, while demand in Asia, and particularly in China and India, and in the Middle East and Africa, will grow substantially. By contrast, the European continent will become a larger importer of gas with a negative balance between demand and supply estimated at 453 billion cubic metres, and with the need for new imports over the next five years (i.e., until 2020) to be divided 65% for northern Europe and 35% for southern Europe.

The Third Energy Package enacted by the European Commission forms a logical component of this energy scenario. In addition to establishing standardised national rules for creating a single European market that is transparent and competitive, it sets conditions for the development of infrastructure to diversify sources, and thus for the security of procurement and improved connection in national markets.

Energy: Global trends in 2040

Natural gas: the growth in global demand for gas will be greater than that for oil and coal combined. Gas will be used primarily (40% of global demand) to generate electricity.

Nuclear power: a 90% increase driven by expansion in China (40% of capacity under construction), Russia, Korea the US and India.

Renewable sources: global demand up by 90% driven by government policies and incentives.

Natural gas: European imports

Adjusted for any geopolitical crises that are not foreseeable at present, it is projected that the demand for gas will primarily be covered by gas through the pipeline from Russia, from the Caspian Sea area through the TAP, the pipeline under construction that will link Europe to Azeri supply sources, and from North Africa, in addition to a portion of liquefied natural gas that will vary according to Asia’s import requirements.

In this scenario, Snam, which is one of the leading operators in Europe, intends to create value by making energy available that the market continues to demand in a safe and sustainable manner and at a fair cost, using a sound strategy based on the development and efficient management of domestic and European infrastructures of the gas system, and on the supply of integrated services to facilitate exchanges among operators, in order to make the market more liquid while gradually changing its role from asset owner to market facilitator. To support expansion in Europe, Snam has signed agreements with major operators in the sector and completed acquisition transactions along the key continental energy corridors leveraging the strategic position of the domestic network.

This sustainable development model is implemented through the structured performance of business activities, which are broken down into “core” and business support activities, and which transform capital raised in financial markets into investments in infrastructure and the services necessary for the operation of the gas system while also enhancing the other forms of capital (financial, intellectual and social) the company requires in order to pursue its business objectives.

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