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Letter to the shareholders and stakeholders

To our Shareholders and Stakeholders,

Your Company has been undergoing a process of profound change in recent years. In a context of ongoing macroeconomic uncertainty, and significant changes in our market that have also been reflected in operator behaviour, we have managed to turn market challenges into opportunities. We have created a new entity that operates independently in the European gas market, while retaining the robustness and reliability that Snam has always been known for.

Our main aim is to create the conditions that will ensure security of supply for the country and a liquid gas market, to help lower energy prices in Italy and bring them into line with European levels.

With this in view, our ambitious investment programme is directed towards developing gas infrastructure in Italy, increasing interconnection with the European networks and expanding internationally to strengthen Snam’s role as a key European infrastructure operator.

After the strategic alliance with Fluxys, which led it to purchase a 31.5% equity interest in Interconnector UK as a joint venture, Snam’s acquisition of TIGF, which it completed in July 2013 (45%) alongside Singapore sovereign wealth fund GIC (35%) and EDF (20%), represents another major stage in Snam’s pathway of international growth, with the aim of generating value from its industrial capacity in integrated gas infrastructure management.

Having successfully established a new Group financial structure, Snam began work to optimise this in 2013, with a view to making it fit better with business requirements in terms of loan duration and exposure to interest rates, with significant results in terms of reducing the overall cost of borrowing.

Lorenzo Bini Smaghi, Chairman (Portrait)

Lorenzo Bini Smaghi

Carlo Malacarne, CEO (Portrait)

Carlo Malacarne

Continuing attention to operating and financial efficiency allowed the Group to generate further satisfying results in 2013, with strong EBITDA of more than €2.8 billion, in line with the previous year, and growth of 17.7% in net profit, to more than €0.9 billion.

Snam’s share price ended 2013 at €4.04, 14.8% higher than the closing price a year earlier (€3.52), and outperforming the European utilities sector (STOXX Europe 600 Utilities: +7.5%). This reflected appreciation of the 2013-2016 strategic plan, the initial results of the foreign development strategy and the clarity and stability of the new regulatory framework set by the Electricity and Gas Authority for the fourth regulatory period.

In 2013, Snam’s share, already listed on the world’s biggest sustainability indices, including the Dow Jones Sustainability World Index, the FTSE4Good Index and the various ECPI and Vigeo indices, last year joined the Climate Disclosure Leadership Index (CDLI), which assesses the transparency of international corporate disclosure on climate change and greenhouse gas emissions. Snam’s inclusion on the CDLI confirms the Company’s commitment to sustainable development, based on its positive interaction with the social context in question.

Under the Euro Medium Term Notes (EMTN) programme, in 2013 the Company issued new bonds worth €2.7 billion in total, further confirming that the international market endorses our business model.

As a result of our ability to add value, the recognised stability of our business model and the solidity of our capital structure, we are able to propose to the Shareholders’ Meeting a dividend of €0.25 per share, of which €0.10 was distributed as an interim dividend in October 2013, confirming our commitment to an attractive and sustainable remuneration of our shareholders in the medium and long term.

To sum up, 2013 was an important year in Snam’s history. Thanks to the commitment of our personnel, we achieved the growth targets that we set, and took further decisive steps on Snam’s pathway of growth, benefiting our stakeholders, and, more generally, the Italian and European gas system as a whole.

27 February 2014

for the Board of Directors

The Chairman

Lorenzo Bini Smaghi, Chairman (Signature)


Carlo Malacarne, CEO (Signature)
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