Reclassified statement of financial position

The reclassified statement of financial position combines the assets and liabilities of the condensed statement based on how the business operates, conventionally split into the three basic functions: investment, operations and financing.

Management believes that this format presents useful additional information for investors as it allows identification of the sources of financing (equity and third-party funds) and the application of such funds for fixed and working capital.

The reclassified consolidated statement of financial position format is used by management to calculate the key leverage and profitability ratios.

Fixed capital (11,981 million euro) is down by 1,144 million euro on 31 December 2017, mainly due to the lesser long-term financial receivables (-1,349 million euro) following the repayment of loans disbursed to the subsidiaries and the associate TAP, partly offset by the increase in equity investments (+207 million euro).

Equity investments

The item totals 6,534 million euro and consists of the equity investments held in the following companies:

Long-term financial receivables

Long-term financial receivables, including the relative short-term portions, amount to 5,431 million euro and refer to receivables for loans disbursed to the subsidiaries Snam Rete Gas (4,435 million euro) and Stogit (987million euro), and the associate TAP (10 million euro). The reduction of 1,349 million euro on 31 December 2017 is mainly due to the closure and simultaneous repayment of loans in place with Snam Rete Gas S.p.A. and Stogit S.p.A. (-972 million euro in total, of which 362 million euro consequent to the liability management operation completed in December 2018) and the repayment³⁷ by TAP, through a true-up mechanism, of 519 million euro, in exchange for 373 million euro for outstanding receivables as at 31 December 2017 and 156 million euro for receivables accrued in 2018.

Net working capital was down by 37 million euro on 31 December 2017. The reduction is mainly due to the reduction in the fair value of the derivative financial instruments (-17 million euro) and the lesser tax receivables (-17 million euro), mainly due to lesser Group VAT receivables.

At 31 December 2018, net financial debt was 7,252 million euro, a reduction of 725 million euro compared with 31 December 2017.

Financial and bond debts are denominated in euros ³⁸ and refer mainly to bond loans (8,446 million euro, or 62.7%) and bank loans (4,749 million euro, or 35.3%, including 1,448 million euro provided by the European Investment Bank - EIB).

Long-term financial liabilities (9.787 million euros) made up approximately 73% of gross financial debt (around 81% as at 31 December 2017).

The breakdown of debt by type of interest rate at 31 December 2018 is as follows:

Variable rate financial liabilities (2,931 million euro) rise by 131 million euro on 31 December 2017, mainly due to the greater use of uncommitted credit facilities (+393 million euro), partially offset by the early repayment of the variable-rate term loan for a nominal value of 250 million euro.

Fixed-rate financial liabilities (10,531 million euro) increased by 697 million euro, mainly due to: (i) the 22 January 2018 issue of a variable-rate private placement³⁹ worth a nominal 350 million euro; (ii) the stipulation of a variable-rate term loan⁴⁰ for a nominal 150 million euro; (iii) the stipulation of a variable-rate term loan⁴¹ for a nominal value of 500 million euro; (iv) the 11 September 2018 issue of a fixed-rate private placement worth a nominal 600 million; (v) the stipulation of a variable-rate term loan⁴² for a nominal 50 million euro; (vi) the 27 November 2018 issue of a fixed-rate private placement worth a nominal 300 million; (vii) the 30

November 2018 issue of unsecured short-term securities (Euro Commercial Paper) on the money market and placed with institutional investors, for a nominal value of 225 million euro. This variation was partly offset: (i) by the repayment of a fixed-rate bond loan maturing on 19 March 2018, for a nominal amount of 851 million euro; (ii) by the repayment of a fixed-rate bond maturing on 10 September 2018, for a nominal amount of 70 million euro; (iii) by the repurchase on the market of fixed-rate bonds for a total nominal value of 538 million euro with an average coupon of 2.6% and a residual duration of approximately 3.7 years; (iv) by the performance of interest rates.

As at 31 December 2018, Snam had unused committed long-term credit facilities worth 3.2 billion euro. In terms of sustainable finance, November 2018 saw the completion of the transformation of these pooled credit facilities into a sustainable loan with 19 national and international banks of primary standing, with a bonus/malus mechanism on the margins paid connected with the achievement of specific ESG (Environment, Social and Governance) KPIs: this is the third largest sustainable loan stipulated in the world and the absolute largest by a gas utility company.

Short-term financial receivables (4,369 million euro) show an increase of 407 million euro compared to 31 December 2017. The increase is mainly due to the greater net use of the intercompany current account by the subsidiaries Snam Rete Gas and Stogit (+413 million euro in total), partially offset by the lesser use of short-term liquidity, due within six months, with the counterparty being a bank of high credit standing (-350 million euro).

Cash and cash equivalents of 1,841 million euro (695 million euro as at 31 December 2017) essentially refer to a short-term liquidity facilities, with a maturity of less than three months, with a bank with a high credit standing (1,000 million euro) as counterparty, and to demand bank deposits (810 million euro).

The reduction in net financial debt of 725 million euro is mainly due: (i) to the net cash flow from operations (747 million euro); (ii) to the repayment of long-term financial receivables (1,342 million euro) by the subsidiaries Snam Rete Gas and Stogit and the associated TAP. These effects were partly offset by: (i) payment of the 2017 dividend (731 million euro, of which 294 million euro on deposit and 437 million euro as balance); (ii) equity investments (205 million euro, net of principal repayments) relative, in particular, to the share capital increase of the associate Senfluga Energy Infrastructure Holding S.A. (121 million euro) for the acquisition of DESFA.