Reclassified balance sheet

The reclassified balance sheet combines the assets and liabilities of the compulsory format included in the annual report and the half-year report based on how the business operates, usually split into the three basic functions: investment, operations and financing.

Management believes that this format presents useful information for investors, as it allows identification of the sources of financing (equity and third-party funds) and the investment of financial resources in fixed and working capital.

Management uses the reclassified balance sheet to calculate the key profitability ratios (ROI and ROE).

RECLASSIFIED BALANCE SHEET (*)

Fixed capital (€19,567 million) rose by €789 million compared with 31 December 2011, due essentially to the increase in property, plant and equipment and intangible assets (+€618 million); the increase in equity investments (+€154 million); and the reduction in net payables relating to investments (+€59 million), related essentially to payment trends.

Changes in property, plant and equipment and intangible assets (+€618 million) are analysed below:

Other changes (+€974 million) relate essentially to: (i) the re-awarding, following calls for tenders, of gas distribution concessions that had expired (+€949 million)²⁵, following the transfer of the relevant plants to the municipalities granting distribution mandates; and (ii) the effect of the adjustment of the current value of expenditure relating to the estimated charges for storage site dismantling and restoration (+€116 million), due essentially to the reduction in forecast discount rates. These factors were partially offset by the recognition of contributions for the period (-€82 million).

INVESTMENTS

Investments in 2012, totalling €1,300 million²⁶ (€1,585 million in 2011), referred mainly to the transportation (€700 million), distribution (€359 million) and storage (€233 million) business segments.

Compulsory inventories

Compulsory inventories, amounting to €363 million (€405 million at 31 December 2011), are made up of minimum quantities of natural gas that the storage companies are obligated to hold pursuant to Presidential Decree 22 of 31 January 2001. The quantities of gas in stock, corresponding to approximately 4.5 billion standard cubic metres of natural gas, are determined annually by the Ministry of Economic Development.

Equity investments

The equity investments item (€473 million) includes the valuation of equity investments using the equity method and refers in particular to Toscana Energia S.p.A. (€161 million), Azienda Energia e Servizi Torino S.p.A. (€123 million), Gasbridge 1 B.V. (€67 million) and Gasbridge 2 B.V. (€67 million)²⁷.

NET WORKING CAPITAL

Net working capital (-€1,146 million) increased by €552 million compared with the previous year, owing mainly to: (i) the increase in trade receivables (+€554 million) relating essentially to the transportation business segment, due to receivables arising from the balancing service (+€310 million²⁸ ), and natural gas storage (+€151 million), due mainly to receivables connected with strategic gas withdrawals; (ii) the reduction in tax payables (+€149 million) due to the payment of the balance of 2011 income tax (+€184 million), which included the entire IRES payable recognised in relation to the Robin Hood Tax; and (iii) the reduction in the market value of derivatives (+€266 million) due to the early extinguishment of IRS contracts in place with eni, in order to execute the contractual provisions set out in the event that eni loses control over Snam.

These factors were partly offset by: (i) the increase in provisions for risks and charges (-€230 million), due mainly to the change in the estimated storage site dismantling and restoration costs (-€116 million) owing to the reduction in forecast discount rates, and to higher provisions for environmental expenses in the distribution segment (-€71 million); and (ii) the increase in other liabilities (-€200 million) resulting mainly from the residual portion of liabilities associated with the early extinguishment of derivatives (-€141 million).

Assets held for sale and directly related liabilities

Assets held for sale and directly related liabilities relate to a real-estate complex owned by Italgas (€15 million, net of environmental provisions for charges relating to restoration work on the property) for which negotiations for a sale are ongoing²⁹.

STATEMENT OF COMPREHENSIVE INCOME

SHAREHOLDERS’ EQUITY

The Extraordinary Shareholders’ Meeting of Snam S.p.A. held on 30 July 2012 resolved to cancel 189,549,700 treasury shares, with prior elimination of their par value.

The share capital as at 31 December 2012 comprised 3,381,638,294 shares (3,571,187,994 as at 31 December 2011), with a total value of €3,571,187,994 (unchanged from 31 December 2011).

As at 31 December 2012, Snam held 2,906,550 treasury shares³⁰ (192,553,051 as at 31 December 2011), equal to 0.09% of its share capital (5.39% as at 31 December 2011), with a book value of €12 million. As at the same date, 2,521,350 treasury shares were committed in relation to the 2005, 2007 and 2008 stock option plans.

Their market value at 31 December 2012 was €10 million³¹.

Information about the individual equity items and changes therein compared with 31 December 2011 is given in Note 27 to the consolidated financial statements, “Shareholders’ Equity”.

RECONCILIATION BETWEEN THE INDIVIDUAL AND CONSOLIDATED NET INCOME AND SHAREHOLDERS’ EQUITY OF SNAM S.P.A.

NET FINANCIAL DEBT (*)

With the implementation and completion of its refinancing programme, which has enabled it to become fully financially independent of eni, Snam has been able, through the credit system and the capital markets, to access a wide range of sources of financing (bonds, syndicated loans with leading national and international banks, bilateral contracts and loan agreements with CDP³² ).

Net financial debt was €12,398 million as at 31 December 2012, compared with €11,197 million at 31 December 2011.

The positive net cash flow from operations (€961 million) allowed the Company to cover part of its financing requirements associated with net investments for the period of €1,351 million. The net financial debt, after the payment to shareholders of the balance of the 2011 dividend of €473 million and the 2012 interim dividend of €338 million, increased by €1,201 million compared with 31 December 2011.

Financial liabilities as at 31 December 2012, denominated entirely in euros, consisted of bonds (€6 billion, or 48%), payables to banks (€5.7 billion³³, or 46%), and loan agreements concerning European Investment Bank (EIB) funding (€0.7 billion³⁴, or 6%).

Long-term financial liabilities of €12,049 million make up approximately 97% of financial debt (61% at 31 December 2011) and have an average duration of five years.

The table below shows long-term liabilities, including the short-term portion thereof, with their respective maturity dates:

The breakdown of debt by type of interest rate at 31 December 2012 is as follows:

Floating-rate liabilities (€6,365 million) rose by €3,778 million, due mainly to the agreement of 12 long-term bank loans (+€5,701 million, including loans with CDP concerning EIB funding worth €402 million) and the repayment of loans in place with eni (-€2,287 million in total).

Fixed-rate financial liabilities (€6,048 million) fell by €2,564 million, due essentially to the net balance for the period of repayments of loans in place with eni (-€8,427 million in total) and the issuance of six bonds (+€6,046 million).

As at 31 December 2012, Snam had unused committed long-term bank credit lines worth around €3.2 billion.

Covenants

The main bilateral and syndicated loans in place with banks and other financial institutions as at 31 December 2012 included covenants, in line with international practice. These concern, inter alia, compliance with financial covenants and pari passu, negative pledge and change of control clauses. Some covenants are also provided for the bonds issued by Snam under the EMTN programme.

During the course of 2012, all of the checks carried out on contractually provided financial covenants confirmed that said covenants were being complied with³⁵.