Outlook
SEPARATION OF ITALGAS FROM SNAM
On 28 June 2016 the Snam Board of Directors approved the separation of Italgas from Snam to be implemented through a unitary and simultaneous transaction which includes, among other things, the partial and proportional spin-off of Snam and consequent listing on the Milan Mercato Telematico Azionario (MTA) of a new beneficiary company of the spin-off with the role of a holding company for the Italgas shareholding (ITG Holding S.p.A.).
Through the industrial and corporate reorganisation operation, the entire shareholding currently held by Snam in Italgas, equal to 100% of the share capital of Italgas, will be transferred to the beneficiary company for the purpose of separating the gas distribution operations in Italy.
The effectiveness of the entire transaction is subject, in addition to legal conditions, including, specifically, approval by the Snam Shareholders’ Meeting, to the issuing by the Italian Stock Exchange of authorisation for admission to trading of the ITG Holding shares on the MTA, the issuing by CONSOB of an opinion of equivalence and the approval of the Snam bondholders. The conclusion of the entire transaction, subject to the realisation of the above-mentioned conditions, is scheduled for by 31 December 2016.
The separation of Italgas from Snam will enable the role of both companies in their respective businesses to be developed significantly. Specifically, Snam will be able to focus on the synergistic and integrated management of the transportation, storage and regasification businesses in Italy and abroad, consolidating its leadership position in Europe and making a contribution to the further integration of European gas markets.
The management outlook with regard to the main drivers in the natural gas transportation, regasification and storage sectors is illustrated below.
INVESTMENTS
In the period 2016-2020 post-spin-off Snam has a significant investment plan scheduled. It is equal to €4.3 billion, of which €0.9 billion in 2016 for sustaining the development of Italian infrastructures and their connection with European ones, reinforcing the safety, flexibility and liquidity of the entire gas system. The goal will be reached through the upgrading of the transportation network and the creation of additional storage capacity in Italy, also enabling the completion of the reverse flow capacity to other European countries and receiving new flows from the Caspian region through the TAP pipeline.
Specifically, investments in the LNG transportation business, equal to €3.8 billion in the time frame of the plan, will be directed, not only at guaranteeing the safety and reliability of the network, but at satisfying the supply capacity and diversification requirements, to the advantage of shippers and end users.
For storage activities, the investment programme of €0.5 billion for the period 2016-2020 is aimed at guaranteeing greater capacity, both modulation and peak, improving the overall liquidity and flexibility of the system and promoting further gas trading opportunities. These increases are mainly related to the gradual entry into service of the Bordolano site (Cremona).
Snam could also leverage its international investments to promote growing connections of European infrastructures and the development of greater diversification and flexibility of gas flows, at the same time maximising the profitability of its assets.
The company will monitor potential new investment opportunities in infrastructure assets, in Europe too, with a risk profile aligned to the one in its current business portfolio with its usual selective and financially-disciplined approach.
GAS DEMAND
Based on most recent estimates of changes in natural gas demand, the European market is generally unchanged compared with 2015 levels over the five-year period from 2016-2020 despite a gradual reduction in production within Europe accompanied by growing dependence on imports.
EFFICIENCY
Snam will continue to focus on operating efficiency in the five-year period 2016-2020, through initiatives that will enable it to keep the level of controllable fixed costs for the post-spin-off scope more or less stable in real terms, on a constant-size basis.