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

Short-term financial liabilities, amounting to €1,212 million (€1,058 million at 31 December 2014), and long-term financial liabilities, including short-term portions of long-term liabilities totalling €12,969 million (€12,884 million at 31 December 2014), break down as follows:

Short-term financial liabilities

Short-term financial liabilities, amounting to €1,212 million (€1,058 million at 31 December 2014), relate mainly to uncommitted floating-rate bank credit lines (€1,203 million).

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

The market value of short-term financial liabilities is the same as their book value.

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

Long-term financial liabilities, including the short-term portion of long-term liabilities, totalled €12,969 million (€12,884 million at 31 December 2014), including a short-term portion of €1,940 million and a long-term portion of €11,029 million.

The short-term portion of long-term liabilities includes the effects of the reclassification (€848 million), from the long-term portion to the short-term portion, of some EIB financing¹¹.

The increase of €85 million compared with 31 December 2014 is due mainly to the new bond issues, new loans taken out and repayments analysed below:

New issues/New bank loans

The new bond issues relate to the reopening, on 28 January 2015, of a bond already in circulation for an incremental nominal value of €250 million. The bond has a maturity of 21 April 2023 and an annual fixed-rate coupon of 1.5%.

The new loans taken out relate to EIB financing with a nominal value of €200 million and a maturity of 16 February 2035, relating to an investment project promoted by Snam Rete Gas.

Repayments

Repayments related to the early extinguishment of two EIB loans worth a total of €300 million.

The breakdown of bond loans (€10,826 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 market value of the bonds, calculated using official listed prices at the end of the period, is approximately €11,588 billion.

Payables for bank loans (€2,141 million) relate to term loans, of which €1,141 million concerns EIB funding.

There are no long-term bank loans denominated in currencies other than the euro, and there were no breaches of loan agreements. Financial liabilities to banks are all at floating rate, with the corresponding market value taken as the nominal repayment value.

Snam has unused committed and uncommitted credit lines of €3.9 billion and €0.7 billion, respectively.

Financial covenants and negative pledge commitments

At 30 June 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. The main medium-/long-term financial payables are subject, inter alia, to the usual covenants imposed by international market practice, e.g. negative pledges, pari passu and change of control clauses.

In particular, the syndicated and bilateral loans are subject, inter alia, to a negative pledge commitment pursuant to which Snam and its subsidiaries are subject to limitations concerning the pledging of 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 specific threshold values and to exceptions on restrictions for which the creation and/or existence is explicitly permitted.

At 30 June 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 rating is downgraded to BBB- (Standard & Poor’s) or Baa3 (Moody’s).

At 30 June 2015, the financial liabilities subject to these restrictive clauses amounted to approximately €2.1 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.

In relation to only some of the loans disbursed by the EIB, for a total principal amount of €848 million at 30 June 2015, and with regard to the order given by the Court of Palermo to Italgas concerning the information required pursuant to Article 34, paragraph 8 of Legislative Decree 159/2011 (judicial control) in relation to the revocation of the judicial administration order imposed on Italgas, the bank is entitled to request early repayment to be made by Snam, making use of and in compliance with the contractual provisions relating to voluntary early repayment, within 60 days of any such request.

Bonds, worth a nominal €10.7 billion, refer to securities issued under the Euro Medium Term Notes programme¹².

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.

Breakdown of net financial debt

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