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

Short-term financial liabilities, amounting to €1,351 million (€1,058 million at 31 December 2014), and long-term financial liabilities, including short-term portions of long-term liabilities totalling €12,445 million (€12,884 million at 31 December 2014), break down as follows:

Short-term financial liabilities

Short-term financial liabilities, amounting to €1,351 million (€1,058 million at 31 December 2014), relate mainly to uncommitted variable-rate credit lines (€1,323 million).

The increase compared with 31 December 2014 (€293 million) is mainly due to net utilisations of uncommitted lines of bank credit (€278 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 0.05% (0.71% for 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 €12,445 million (€12,884 million at 31 December 2014).

The breakdown of bond loans (€9,811 million), indicating the issuing company, the year of issue, the currency, the average interest rate and the maturity, is provided in the following table.

The new bond loans (€937 million) relate to: (i) the reopening on 28 January 2015, for an incremental nominal value of €250 million, of a fixed-rate bond loan already in issue, maturing in April 2023 (€255 million); (ii) the liability management operation, which entailed the repurchase of fixed-rate bonds with residual maturity of less than two years for a nominal value of approximately €1.0 billion and the simultaneous issue of a new fixed-rate bond with a nominal value of €750 million (€682 million). The difference between the market value of the repurchased bonds and the value of the new issue was settled by Snam in cash³¹.

Payables for bank loans (€2,627 million) relate to term loans, of which €1,627 million concern European Investment Bank (EIB) funding. In 2015, three variable-rate loans were contracted with the EIB to fund investment projects, for a total nominal amount of €697 million, taken out by Snam Rete Gas (€573 million) and Italgas (€124 million) respectively.

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 loan contracts with the EIB) was 0.40% (1.07% for 2014).

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

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 €3.95 billion and €0.82 billion, respectively.

Financial covenants and negative pledge commitments

At 31 December 2015, 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. These medium-/long-term loans are subject, inter alia, to the usual covenants imposed in international market practice, e.g. negative pledge, 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 for which the creation and/or existence is explicitly permitted.

At 31 December 2015, 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. Exclusively for the EIB loans, the lender has the option to request additional guarantees if Snam’s credit rating is downgraded to BBB- (Standard & Poor’s/Fitch Ratings Limited) or Baa3 (Moody’s) for at least two of the three ratings agencies.

At 31 December 2015, the banking financial liabilities subject to these restrictive clauses amounted to approximately €2.6 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 €9.7 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.

At 31 December 2015 there were not events not in compliance with said obligations and contractual covenants.

Breakdown of net financial debt

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