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 the 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).

Fixed capital (€20,583 million) rose by €1,016 million compared with 31 December 2012, due essentially to an increase in equity investments (+€551 million) and an increase in property, plant and equipment and intangible assets (+€446 million).

Changes in property, plant and equipment and intangible assets (+€446 million) are analysed below:

Other changes (-€52 million) relate to: (i) the recognition of contributions (-€71 million); (ii) the change in inventory of piping and related materials purchased for investment purposes and not yet used in plant construction (-€33 million); and (iii) the change in estimated charges for dismantling and restoring storage sites (-€28 million) owing essentially to higher expected discount rates. These factors were partly offset by the recognition of assets (+€64 million) in relation to the estimated charges for dismantling and restoring of natural gas transportation infrastructure.

Technical investments in 2013, totalling €1,290 million²⁷ (€1,300 million in 2012), referred mainly to the transportation (€672 million), distribution (€358 million) and storage (€251 million) business segments.

Compulsory inventories

Compulsory inventories, at €363 million (the same as at 31 December 2012), consist of the minimum quantities of natural gas that the storage companies are obliged 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 Development²⁸.

Equity investments

The equity investments item (€1,024 million) includes the valuation of equity investments using the net equity method and refers in particular to TIGF Holding SAS (€562 million)²⁹, Toscana Energia S.p.A. (€152 million), Azienda Energia e Servizi Torino S.p.A. (€126 million), Gasbridge 1 B.V. (€63.5 million) and Gasbridge 2 B.V. (€63.5 million).

Net working capital fell by €16 million compared with 31 December 2012 to -€1,155 million, owing mainly to: (i) the increase in trade payables (-€283 million), relating mainly to the transportation segment, as a result of higher payables arising from the balancing service (-€310 million); (ii) higher provisions for risks and charges (-€80 million), due mainly to the increase in provisions for site dismantlement and restoration (-€46 million) and provisions for termination benefits (-€26 million); (iii) the reduction in tax receivables (-€72 million), due mainly to the reimbursement of VAT credits outstanding at 31 December 2012 and associated with the distribution segment; and (iv) higher tax payables (-€62 million), due essentially to higher IRES and IRAP payables (-€49 million) as a result of higher pre-tax profits.

These factors were partly offset by: (i) higher trade receivables (+€347 million), relating to the transportation segment, due mainly to higher receivables from the balancing service (+€182 million) mostly for November and December, and to the storage segment (+€59 million), due to an increase in receivables from the Electricity Equalisation Fund for tariff charges; and (ii) the reduction in accruals and deferrals from regulated activities (+€106 million), relating mainly to the transportation segment.

Assets held for sale and directly related liabilities

Assets held for sale and directly related liabilities relate to a property complex owned by Italgas (€16 million, net of environmental provisions for charges relating to restoration work on the property) for which negotiations for a sale are ongoing³⁰.

The other changes (+€8 million) relate mainly to the effects of the exercise of 1,233,700 stock options by Snam executives³¹ (+€4 million).

Information about the individual equity items and changes therein compared with 31 December 2012 is given in Note 29 to the consolidated financial statements, “Shareholders’ Equity”.

Net financial debt was €13,326 million as at 31 December 2013, compared with €12,398 million at 31 December 2012.

The positive net cash flow from operating activities (€1,698 million) enabled the Group to almost fully meet its funding requirements for net technical investments and the acquisition of an equity investment in TIGF (€1,790 million in total). Following the payment of a dividend of €845 million to shareholders, net financial debt totalled €13,326 million, up by €928 million compared with 31 December 2012.

Financial and bond debt, which totalled €13,328 million at 31 December 2013 (compared with €12,413 million at 31 December 2012), was denominated entirely in euros, with the exception of a fixed-rate bond worth ¥10 billion, which was fully converted into euros via a hedging derivative worth around €75 million as at the issue date.

Financial liabilities at 31 December 2013 relate mainly to bonds (€8.9 billion, equal to 66.5%), bank loans (€3.1 billion, equivalent to 23.3%) and loan agreements concerning European Investment Bank (EIB) funding (€1.3 billion, equal to 10.1%).

Long-term financial liabilities of €11,078 million make up approximately 83% of financial debt (around 96% at 31 December 2012) and have a maturity of five years (unchanged from 31 December 2012).

The following table shows the long-term financial liabilities and their respective maturity dates:

The breakdown of debt by type of interest rate at 31 December 2013 is as follows:

Fixed-rate financial liabilities (€8,559 million) rose by €2,511 million after new bonds were issued.

Floating-rate financial liabilities (€4,769 million) fell by €1,596 million compared with 31 December 2012, owing essentially to the early extinguishment of a term loan (-€1,483 million) and to the net repayment of revolving credit lines (-€1,673 million). These effects were partly offset by bank term loans taken out (+€1,249 million, of which €647 million related to EIB funding) and by the private placement of a bond (+€300 million).

At 31 December 2013, Snam had unused committed long-term credit lines worth €5.2 billion³².

Covenants

The main bilateral and syndicated loans in place with banks and other financial institutions as at 31 December 2013 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 2013, all of the checks carried out on contractually provided financial covenants confirmed compliance with said covenants³³.