16 Short-term financial liabilities, long-term financial liabilities and short-term portions of long-term financial liabilities

Short-term financial liabilities, amounting to €1,058 million (€1,947 million at 31 December 2013), and long-term financial liabilities, including short-term portions of long-term liabilities totalling €12,884 million (€11,381 million at 31 December 2013), break down as follows:

Short-term financial liabilities

Short-term financial liabilities, amounting to €1,058 million (€1,947 million at 31 December 2013), relate mainly to uncommitted variable-rate lines of credit (€1,045 million).

The reduction compared with 31 December 2013 (€889 million) is due mainly to the repayment of a naturally matured term loan (for a nominal €600 million) and early repayments of revolving credit lines (€300 million).

There are no short-term financial liabilities denominated in currencies other than the euro.

The weighted average interest rate on short-term financial liabilities was 0.71% for the year ended 31 December 2014.

Long-term financial liabilities and short-term portions of long-term financial liabilities

Long-term financial liabilities, including short-term portions of long-term liabilities, amounted to €12,884 million (€11,381 million at 31 December 2013).

The increase of €1,503 million compared with 31 December 2013 is due mainly to the new bond issues, new bank loans taken out and repayments analysed below:

New issues/New bank loans

New bond issues (€1,733 million) relate to four bonds issued on 22 January 2014, 22 April 2014 and 22 October 2014 for a nominal value of €600 million and €150 million, €500 million and €500 million, respectively.

New bank loans taken out concern four loans maturing in 2017 with a nominal value of €500 million, €200 million, €200 million and €100 million, respectively.

Repayments

Repayments (€1,474 million) relate mainly to the following loans: (i) revolving credit lines relating to bilateral loans with third-party banks for a total of €1,070 million; (ii) a term loan with Cassa Depositi e Prestiti (CDP), concerning European Investment Bank (EIB) funding, partially repaid ahead of schedule in the amount of €100 million; and (iii) a matured term loan with a nominal amount of €100 million.

The breakdown of bond loans (€10,631 million), indicating the issuing company, the year of issue, the currency, the average interest rate and the maturity, is provided in the following table.

Payables for bank loans (€2,251 million) relate to term loans, of which €1,251 million concern European Investment Bank (EIB) funding³⁹.

There are no other long-term bank loans denominated in currencies other than the euro.

The weighted average interest rate on bank loans used (excluding loans concerning EIB funding) was 1.07% for the year ended 31 December 2014.

There were no breaches of loan agreements as at the reporting date.

Payables to other lenders (€2 million) relate to loans granted by the Lombardy and Emilia Romagna Regions.

The market value of short- and long-term financial liabilities is reported in Note 24, “Guarantees, commitments and risks”.

Snam has unused committed and uncommitted credit lines of €3.9 billion and €1.1 billion, respectively.

Financial covenants and negative pledge commitments

At 31 December 2014, Snam had medium- and long-term loans from a pool of national and international banks. Some bilateral loan agreements were also entered into with these banks. The main medium/long-term financial payables are subject, inter alia, to the usual covenants imposed in international market practice, e.g. financial covenants and negative pledges, pari passu and change of control clauses.

In particular, the syndicated loans and bilateral loans are subject, inter alia, to a negative pledge covenant pursuant to which Snam and the group subsidiaries are subject to limitations in terms of pledging real property rights or other restrictions on all or part of the respective assets, shares or merchandise, and/or documents representing merchandise; this covenant is subject to set expiry dates and to exceptions on restrictions whose creation and/or existence is explicitly permitted.

At 31 December 2014, Snam also had medium/long-term loans taken out with the European Investment Bank (EIB), the contractual clauses of which are broadly in line with those described above.

At 31 December 2014, the financial debt subject to these restrictive clauses amounted to approximately €2.2 billion.

Failure to comply with the covenants established for these loans – in some cases only when this non-compliance is not remedied within a set time period – and the occurrence of other events, such as cross-default events, some of which are subject to specific threshold values, may result in Snam’s failure to comply and could trigger the early repayment of the relative loan.

Bonds, with a nominal value of €10.44 billion, refer to securities issued under the Euro Medium Term Notes programme.

The covenants set for the programme’s securities reflect international market practices and relate, inter alia, to negative pledge and pari passu clauses. Specifically, under the negative pledge clause, Snam and its significant subsidiaries are subject to limitations in relation to the creation or maintenance of restrictions on all or part of their own assets or inflows to guarantee present or future debt, unless this is explicitly permitted.

Failure to comply with these covenants – in some cases only when this non-compliance is not remedied within a set time period – and the occurrence of other events, such as cross-default events, some of which are subject to specific threshold values, may result in Snam’s failure to comply and could trigger the early repayment of the relative loan.

Exclusively for the EIB loans, the creditor has the option to request additional guarantees if Snam’s rating is downgraded to BBB- (Standard & Poor’s) or Baa3 (Moody’s).

With regard to the preventative measure of judicial administration of which subsidiary Italgas was notified by the Court of Palermo on 11 July 2014, the developments between the date of the measure and the date of this Report, as well as the actions taken by the Company, do not constitute grounds to activate the aforementioned contractual protections. For further information, see Note 24 – “Guarantees, commitments and risks – Disputes and other provisions” in the paragraph “Judicial administration of subsidiary Italgas – Court of Palermo”.

Breakdown of net financial debt

The breakdown of net financial debt, showing related-party transactions, is provided in the following table: