Main events
International growth
Completion of the TIGF acquisition
Following the agreement signed on 5 April 2013 with the Total group, on 30 July 2013 TIGF Holding, which is controlled by Snam (45%), Singapore sovereign wealth fund GIC (35%) and EDF (20%, through its fund dedicated to the liabilities from the dismantling of nuclear reactors), acquired (through TIGF Investissements, a wholly owned subsidiary of TIGF Holding) the entire share capital of TIGF, a company involved in the transportation and storage of gas in the south-west of France. TIGF Investissements paid just under €1.6 billion to Total to acquire the equity interest. Snam’s total outlay for its 45% stake in TIGF Holding was €597 million.
Optimisation of the Group’s financial structure
Progress made in 2013
In 2013, Snam began work to optimise the Group’s financial structure with a view to making it fit better with business requirements in terms of loan duration and exposure to interest rates, simultaneously reducing the overall cost of borrowing.
Specifically with regard to the Euro Medium Term Notes (EMTN) programme9, the following transactions were carried out: (i) a €1.5 billion bond issue in two tranches with the following respective characteristics: (a) €1 billion with a four-year term expiring on 30 June 2017 and a fixed-rate annual coupon of 2.375%; and (b) €0.5 billion with an eight-year term expiring on 29 January 2021 and a fixed-rate annual coupon of 3.375%. This issue enabled the early extinguishment of a €1.5 billion term loan with a floating rate and an original maturity of 24 July 2017, which was taken out as part of the pool financing on 24 July 2012; (ii) two taps of existing fixed-rate bond issues for a total incremental amount of €750 million, of which €250 million related to the four-year bond maturing on 30 June 2017 with a fixed-rate annual coupon of 2.375% and €500 million related to the 6.5-year bond maturing on 13 February 2020 with a fixed-rate annual coupon of 3.5%; (iii) two private placements: the first a €300 million three-year bond, maturing on 17 October 2016 with a variable quarterly coupon equal to Euribor plus 85 bps, and the second a €70 million five-year bond, maturing on 10 September 2018 with a fixed-rate annual coupon of 2.625%; and (iv) a ¥10 billion (around €75 million) six-year private placement, maturing on 25 October 2019 with a fixed-rate annual coupon of 1.115%, converted fully into euros by a hedging derivative.
On 24 October 2013, Snam signed two loan agreements with the European Investment Bank (EIB), the first for €300 million relating to an Italgas project and the second for €65 million relating to a Snam Rete Gas project. The two loans, which are in addition to the €283 million loan awarded to Stogit in August 2013, are part of Snam’s attempts to optimise the Group’s financial structure; they are complementary to bond and bank loans, with longer durations (up to 20 years) and competitive costs.
Lastly, in 2013 Snam managed to negotiate new and improved terms with its lender banks for the syndicated loan (totalling €3.5 billion) and the bilateral loans (totalling €1.9 billion) taken out in 2012, securing a significant reduction in the overall borrowing cost.
These transactions enabled Snam to increase the fixed-rate portion of its overall debt from 49% at the end of 2012 to 64% in 2013, significantly reducing exposure to interest-rate fluctuations and consolidating the debt structure with an average medium-to-long-term loan duration of around five years.
Transactions completed after the end of the year
The debt structure optimisation process that began in 2013 has continued into 2014. On 22 January 2014, Snam carried out: (i) a €600 million 10-year bond issue, maturing on 22 January 2024, with a fixed-rate annual coupon of 3.25%; and (ii) a €150 million two-year private placement, maturing on 22 January 2016, with a quarterly variable coupon equal to Euribor plus 65 bps. The extension of the EMTN programme, which was authorised by the Board of Directors on 11 June 2013 for up to €10 billion, permits the issue of any additional bonds for up to €0.55 billion by 30 June 2014.
Moody’s confirmed a Baa1 rating for Snam’s long-term debt on 18 February 2014, raising the outlook from ‘negative’ to ‘stable’. The revised outlook came after a similar decision was taken on 14 February 2014 with regard to Italian sovereign debt and reflects, inter alia, the improvement in Snam’s liquidity conditions and its access to the debt market.
Regulatory framework
In terms of national tariff regulations, 2013 was an important year for Snam. A clear, stable and transparent regulatory framework plays a key role in investment development and long-term sustainable growth.
Through Resolutions 438/2013/R/gas, 514/2013/R/gas and 573/2013/R/gas, the Electricity and Gas Authority defined new tariff criteria for the fourth regulatory period, for natural gas regasification (1 January 2014 - 31 December 2017), transportation (1 January 2014 - 31 December 2017) and distribution (1 January 2014 - 31 December 2019), respectively.
More details on the changes to the regulatory framework in 2013 can be found in the section “Business segment operating performance – Regulation”.
9 On 11 June 2013, the Snam Board of Directors decided to renew the EMTN programme for up to €10 billion, to be issued in one or more tranches by 30 June 2014.