Ownership unbundling of Snam from eni
The Prime Ministerial Decree of 25 May 2012 defined the terms and conditions of the ownership unbundling of Snam from eni, to be adopted by 25 September 2013. The approval of this Decree completed the legislative framework of the ‘ownership unbundling’ of the natural gas transportation, distribution, storage and regasification activities outlined in the Liberalisation Decree.
The Prime Ministerial Decree provided for eni to sell a stake of no less than 25.1% of Snam to CDP, with a view to ensuring a stable nucleus within Snam’s share capital and therefore the development of strategic activities and the protection of the public utilities services carried out by Snam.
To this end, upon fulfilment of the conditions precedent (including approval from the Competition Authority), on 15 October 2012 eni completed the sale to CDP of 1,013,619,522 ordinary shares, equivalent to 30% minus one share of Snam’s voting capital, thereby losing control of Snam.
As at 31 December 2012, CDP owned 30.03% of Snam’s voting capital.
The transaction followed the sale to institutional investors of a further 5% of Snam’s share capital (equivalent to 5.28% of the voting capital) by eni on 18 July 2012.
On 15 January 2013, eni completed the placement with institutional investors of 1,250 million bonds convertible into ordinary Snam S.p.A. shares. The assets underlying the bonds are around 288.7 million ordinary Snam shares, equivalent to some 8.54% of the Company’s capital.
eni’s stake in Snam (around 12% of capital, net of the shares underlying the aforementioned bond) may be sold pursuant to the Prime Ministerial Decree.
Debt refinancing
As part of the broad framework outlined by the Prime Ministerial Decree, in 2012 Snam began and completed a significant debt refinancing programme with a view to achieving full financial independence from eni. Specifically, the Company carried out the following transactions as part of its debt refinancing.
With the aim of diversifying sources of financing by broadening the investor base, on 4 June 2012 the Board of Directors of Snam resolved to issue one or more bonds for placement with institutional investors operating in Europe, on the basis of a programme to issue Euro Medium Term Notes (EMTN) for a total maximum amount of €8 billion, to be issued in one or more tranches by 4 June 2013.
As part of the EMTN programme, Snam issued bonds for a total of €6 billion, with the following characteristics: (i) €1 billion of four-year bonds issued on 11 July 2012 with a maturity of 11 July 2016 and an annual fixed-rate coupon of 4.375%; (ii) €1 billion of 6.5-year bonds issued on 19 July 2012 with a maturity of 18 January 2019 and an annual fixed-rate coupon of 5.0%; (iii) €2.5 billion of bonds issued on 17 September 2012, including €1.5 billion of 5.5-year bonds with a maturity of 19 March 2018 and an annual fixed-term coupon of 3.875%, and €1 billion of 10-year bonds with a maturity of 19 September 2022 and an annual fixed-rate coupon of 5.25%; and (iv) €1.5 billion of bonds issued on 13 November 2012, including €0.75 billion of three-year bonds with a maturity of 13 November 2015 and an annual fixed-rate coupon of 2.000%, and €0.75 billion of 7.4-year bonds with a maturity of 13 February 2020 and an annual fixed-rate coupon of 3.500%.
On 24 July 2012, Snam took out a syndicated loan with a group led by 11 leading domestic and international banks for a total of €9 billion in various forms (a bridge-to-bond facility for €4 billion, revolving credit lines for €3.5 billion and a term loan for €1.5 billion). The amount of this syndicated financing was reduced to €5 billion by the €4 billion of bonds issued in September and November 2012. As at 31 December 2012, Snam had unused committed credit lines from the syndicated loan amounting to around €2.2 billion.
The Company has also signed: (i) nine bilateral agreements with third-party banks for a total of around €3.7 billion, of which some €2.8 billion had been disbursed as at 31 December 2012; and (ii) two loan agreements with CDP concerning European Investment Bank (EIB) funding for a total amount of €400 million, which had been fully disbursed as at 31 December 2012.
These agreements, together with the bond issues, have enabled Snam to obtain the resources needed to terminate the financial agreements between Snam and its subsidiaries and eni, pursuant to the contractual provisions set out in the event that eni loses control over Snam. Specifically, the contracts that were terminated early concerned: (i) short-term credit lines for centralised treasury management (€2.2 billion, which had been repaid in full as at 31 December 2012); (ii) medium-to-long-term loans (€6.5 billion7, which had been repaid in full as at 31 December 2012); and (iii) interest rate hedging derivatives for a total notional amount of €4.2 billion with €350 million of expenses, of which €210 million was paid on 5 October 2012 and the remaining €140 million on 15 January 2013.
Snam aims to gradually achieve a debt portfolio that is balanced between bonds and bank loans, in line with the Company’s regulatory requirements and business profile.
On 13 June 2012, Snam obtained a credit rating from Moody’s (Baa1 with stable outlook) and from Standard & Poor’s (A- with negative outlook).
On 27 September 2012, Moody’s, having downgraded Italy’s creditworthiness, confirmed Snam’s Baa1 rating, but assigned it a negative outlook.
On 30 January 2013, Standard & Poor’s confirmed Snam’s rating of A- with negative outlook.
7 This does not include two loans signed with eni concerning EIB funding (around €0.5 billion) which were transferred from eni to Snam on 11 October 2012.
