Glossary
A glossary of financial, commercial and technical terms, as well as units of measurement, is available online at www.snam.it. The most common terms are described below.
ECONOMIC AND FINANCIAL TERMS
Amortisation
Process by which the cost of fixed assets is spread over a certain period to the advantage of the Company, usually the useful life of the asset.
Cash flow
Net cash flow from operating activities is represented by the cash generated by a company over a certain period of time. Specifically, the difference between current inflows (mainly cash revenue) and current cash outflows (costs in the period that generated cash outflows).
Comprehensive income
Includes both net income for the period and changes in equity, which are recognised in equity in accordance with international accounting standards (Other components of comprehensive income).
Controllable fixed costs
Fixed operating costs of regulated activities, represented by the sum of “Total recurring personnel expense” and “Recurring external operating costs”.
Core business revenue
Income from selling goods and/or providing services that are integral to the core business, including all recurring economic values linked to a company’s typical field of business.
Derivatives
A financial instrument is defined as a derivative when its price/yield profile derives from the price/yield parameters of other major instruments – known as “underlying” – such as commodities, currencies, interest rates, securities and share indices.
Dividend
Payment to shareholders voted for by the Shareholders’ Meeting and proposed by the Board of Directors.
Dividend payout
Ratio between the dividend and net profit for the period, and equal to the percentage of profits paid out to shareholders in the form of dividends.
EBIT
Difference in a given period between sales revenue and services revenue, other revenue, operating costs, amortisation, depreciation and impairment losses over a given period. It is therefore the operating profit before financial income and expenses and taxes.
EBITDA
Used by Snam in its internal (business plan) and external (to analysts and investors) presentations. Unit of measurement to assess the Group’s operating performance, as a whole and in the individual business segments, in addition to EBIT. Determined by the difference between revenue and operating costs.
Excise duty
Indirect tax for immediate payment, applied to the production or consumption of certain industrial goods (including oil products and natural gas).
Investments
Costs incurred for the acquisition of long-term assets where the useful life does not expire over one reporting period.
Net financial debt
A valid indicator of the ability to meet financial obligations. Net financial debt is represented by gross financial debt minus cash and cash equivalents, as well as other financial receivables not held for operations.
Net financial expense
Net cost incurred for using third-party capital. Includes other net expense related to financial operations.
Net invested capital
Net investments of an operational nature, represented by the sum of net working capital and fixed assets, provisions for employee benefits and assets and liabilities held for sale.
Net profit
EBIT minus the result from financial operations and income taxes.
Net working capital
Capital which is invested in short-term assets and is an indicator of a company’s short-term financial position. Calculated using all short-term, non-financial assets and liabilities.
Non-current assets
Balance sheet item which shows long-lasting assets, net of amortisation, depreciation and impairment losses. These are divided into the following categories: “Property, plant and equipment”, “Compulsory inventories”, “Intangible assets”, “Equity investments”, “Financial assets” and “Other non-current assets”.
Operating costs
Costs incurred in carrying out a company’s core business. These include purchases, services, energy, consumables, maintenance and personnel expense.
Shareholders’ equity
Total resources contributed by shareholders, plus retained profits and minus losses.
Natural gas transportation and regasification
COMMERCIAL TERMS
Network Code
Document governing the rights and obligations of the parties involved in providing the transportation service.
Network entry point
Each point or a localised group of physical points on the national gas transportation network at which gas is delivered from the user to the transporter.
Redelivery point
The physical network point, or local combination of physical points, at which the transporter redelivers gas transported to the user, and where such gas is metered.
Regasification Code
Document which sets out the rules and processes characteristic of the natural gas regasification service.
Regasification Tariffs
Unit prices applied for regasification. These include capacity and commodity tariffs, related to the required regasification capacity and to the volumes of gas actually unloaded from tankers, respectively. With regard to the tariff structure, as at 1 January 2014, 100% of total revenue is allocated to the capacity component.
Regulatory period
Period of time (usually four years) for which criteria are defined for setting tariffs for natural gas transportation and dispatching and liquefied natural gas regasification. The third regulatory period ended on 31 December 2013 for transportation and regasification activities. We are currently in the fourth regulatory period, which runs from 1 January 2014 to 31 December 2017.
Thermal year
Period of time into which the regulatory period is divided. The final thermal year of the third regulatory period for transportation and regasification activities ended on 31 December 2013.
Transportation capacity
Transportation capacity is the maximum quantity of gas which can be injected into the system (or withdrawn from it) during the course of a gas day, at a specific location, in compliance with the technical and operating restrictions established for each section of pipeline and the maximum performance of plants located along such pipelines.
These capacities are assessed using hydraulic network simulations carried out in appropriate transportation scenarios and in accordance with recognised technical standards.
Transportation Tariffs
Unit prices applied for transporting and dispatching natural gas. These include capacity and commodity tariffs, related to the required transportation capacity and to the volume of gas actually injected into the network, respectively.
User
The user of the gas system, which, by confirming the capacity granted, acquires transportation capacity for its own use or for assignment to others.
Virtual exchange point (VEP)
A virtual point located between the Entry and Exit Points of the national transportation network where users and other authorised entities may, on a daily basis, exchange and sell gas injected into the network.
TECHNICAL TERMS
Liquefied natural gas (LNG)
Natural gas essentially comprising methane liquefied by cooling at around -160°C, at atmospheric pressure, to make it suitable for methane tanker transportation or reservoir storage. In order to be injected into the transportation network, the liquid must be reconverted into a gas at regasification plants and brought to the operating pressure of the pipelines.
LNG regasification
Industrial process whereby natural gas is converted from a liquid to a gaseous state.
National gas transportation network
This consists of the gas pipelines indicated in Article 2 of the Ministerial Decree of 22 December 2000, as updated annually. It is the aggregate of methane pipelines and plants that have been assessed and checked taking into account restrictions imposed by imports, exports, key national production and storage facilities, and is used to transfer significant quantities of gas from these network injection points to major areas of consumption. Several inter-regional methane pipelines as well as smaller pipelines which serve to close network links formed by the above pipelines are also included for the same purpose. The national gas transportation network also includes compression stations and plants connected to the pipelines described above.
Natural gas
Hydrocarbon mixture consisting mainly of methane, and to a lesser degree, ethane, propane and higher hydrocarbons. Natural gas injected in the methane pipeline network must comply with a single quality specification to ensure that the gas in transit is interchangeable.
Natural gas transportation network
The aggregate of gas pipelines, line plants, compression stations and infrastructure, which, at the national and regional level, provide the transportation of gas by interconnecting with international transportation networks, production and storage points and redelivery points for the purposes of distribution and use.
Regional transportation network
This consists of gas pipelines not included in the list in Article 2 of the Ministerial Decree of 22 December 2000, as updated annually, and its main function is to move and distribute gas in demarcated local areas which are typically regional in scale.
Natural gas storage
COMMERCIAL TERMS
Injection phase
Period from 1 April to 31 October of the same year.
Regulatory period
Period of time (usually four years) for which criteria are defined for setting tariffs for natural gas storage services. We are currently in the third regulatory period, which runs from 1 January 2011 to 31 December 2014.
Thermal year
Period of time into which the regulatory period is divided. We are currently in the final thermal year of the third regulatory period, which will end on 31 December 2014.
Withdrawal phase
Period from 1 November of one year to 31 March of the following year.
TECHNICAL TERMS
Mining storage
Mining storage is necessary for technical and economic reasons in order to enable optimum cultivation of Italy’s natural gas fields.
Modulation storage
Aims to respond to changing hourly, daily and seasonal demands.
Strategic storage
Aims to compensate for a lack of or reduction in supplies from non-EU imports or crises in the gas system.
Natural gas distribution
COMMERCIAL TERMS
Concession
The deed by which a local authority entrusts to a company the management of a service which falls within the remit of said authority, and for which said company assumes the operational risk.
Distribution Code
The document governing the rights and obligations of the parties involved in providing the gas distribution service.
End user
The consumer who buys gas for their own use.
Gas distribution service
Service of transporting natural gas through networks of local methane pipelines from one or more delivery points to redelivery points, generally at low pressure and in urban areas, for delivery to end users.
Redelivery point
This is the point of demarcation between the gas distribution plant and the plant owned or managed by the end user at which the distribution company redelivers gas transported for supply to the end user, and at which metering occurs.
Regulatory period
Period of time (usually four years) for which criteria are defined for setting tariffs for gas distribution services. The third regulatory period ended on 31 December 2013. We are currently in the fourth regulatory period, which runs from 1 January 2014 to 31 December 2019.
Retail Company
Company which, by way of a contract giving it access to the networks managed by a distributor, sells the gas.
Tariff area
The tariff area is the area used to determine distribution tariffs and consists of all communities served by the same distribution plant. If several local authorities collectively designate an operator to perform the distribution service, or declare themselves a single tariff area, the tariff area coincides with the group of municipalities served through several distribution plants by one or more operators.
Thermal year
Period of time into which the regulatory period is divided. The final thermal year of the third regulatory period ended on 31 December 2013.
TECHNICAL TERMS
Equalisation
Difference between revenues for the period (annual TRL) and those invoiced to retail companies on the basis of volumes distributed. The net position with the Electricity Equalisation Fund is established at the end of the thermal year and settled over the course of the year on the basis of advance payments.
Gas distributed
Amount of gas delivered to users of the distribution network at the redelivery points.
TRL (Total Revenue Limit)
Total revenue allowed for distribution companies by the regulatory body to cover costs for providing distribution and metering services.