Reclassified statement of financial position

The reclassified statement of financial position combines the assets and liabilities of the compulsory format included in the Annual Report and the Half-Year Report based on how the business operates, usually split into the three basic functions of investment, operations and financing.

Management believes that this format presents useful information for investors as it allows the identification of the sources of financing (equity and third-party funds) and the investment of financial resources in fixed and working capital.

The Fixed Capital (18,080 million euro) decreased by 4,041 million euro in respect to 31 December, 2015 essentially as a result of the reduction of immaterial assets (-4,665 million euro) deriving from the deconsolidation of the Italgas Group (-4,487 million euro), whose effects were compensated in part by the higher financial credits instrumental to operating activities (+135 million euro) and the increase of shares (+127 million euro).

The change in property, plant and equipment and in intangible assets can be broken down as follows:

Other changes (+€66 million) relate essentially to: (i) the effects of adjusting the present value of disbursements for the dismantling and restoration of sites (+€116 million), mainly due to a reduction in the expected discounting rates²⁹; (ii) grants for the period (-€41 million); and (iii) the change in inventories of pipes and related accessory materials used to construct the plants (-€12 million).

The variation in the area of consolidation (+4,712 million euro) refers to the exit of Italgas Reti S.p.A. (previously Italgas S.p.A.) and the companies controlled by this company, beginning on November 7, 2016 as a result of the operation involving separation from Snam of the natural gas distribution business

The technical investments of 2016 of the continuing operations total 906 million euro³⁰ (879 million euro in 2015) and principally refer to the sectors of transport (776 million euro) and storage (117 million euro).

Compulsory inventories

The fixed warehouse stock – Mandatory Discards – equal to 363 million euro (equal to 31 December 2015), are composed to a minimum degree of natural gas that the storage company are required to withhold in accordance with D.P.R. no. 22 of 31 January 2001. The quantities of natural gas in stock, equal to around 4.5 billion standard cubic metres, are determined annually by the Ministry of Economic Development³¹.

Equity investments

The equity investments item (€1,499 million) includes mainly the valuation of equity investments using the equity method and refers to the companies Trans Austria Gasleitung GmbH – TAG (€512 million), TIGF Holding S.A.S. (461 million euro), Trans Adriatic Pipeline AG – TAP (161 million euro), AS Gasinfrastrucktur Beteiligung GmbH (135 million euro) and Gasbridge 1 B.V. and Gasbridge 2 B.V. (87 million euro in total).

Financial receivables held for operating activities

The financial credits instrumental to operating activities (213 million euro), an increase of 135 million euro in respect to 31 December 2015, refer to the Shareholders’ Loan issued in favour of the affiliate Trans Adriatic Pipeline AG (TAP)³².

The Net Capital for the Fiscal Year (-483 million euro) increased by 124 million euro in respect to 31 December 2015. In addition to the effects deriving from the deconsolidation of Italgas (+56 million euro in total, an expression of the relations of the Italgas group with third parties as of December 2015), the increase is particularly due: (i) to the reduction of business debts (+146 million euro) attributable to the transport sector (+163 million euro) essentially for the effective entry, beginning on 1 October 2016, of the new measures for rebalancing that modified, in particular, the financial regulatory dynamics of the sale of gas through the platform made available by EMO; (ii) the increase of business credits of Snam S.p.A. (+35 million euro) deriving from the provision of services to the companies of the Italgas Group (+30 million euro) with the objective of ensure the continuity of activities previously guaranteed by Snam.

These factors were partially compensated by higher funds for risks and expenses (-123 million euro) which can be traced principally to the dismantling and reset fund for the transport and storage sector (-115 million euro in total) as a result of the reduction of the implementation rates expected.

Information about the individual shareholders’ equity items and changes therein compared with 31 December 2015 is provided in Note 22 “Shareholders’ equity” in the Notes to the consolidated financial statements.

On 31 December 2016 the net financial debt totalled 11,056 million euro, a 2,723 million euro reduction (13,779 million euro as at 31 December 2015).

The net cash flow from operating activities (1,627 million euro), together with the cash flow from disinvestments (1,506 million euro), essentially attributable to the sums received for the transfer of 38.87% of the shares in Italgas Reti S.p.A. (1,502 million euro, net the available liquidity transferred), allowed the company to fully finance the needs connected to technical investments, in shares and financial assets not instrumental to operating activities (1,426 million euro in total) and to generate a Free Cash Flow of 1,707 million euro. Thanks to the effects on the financial position deriving from financial credits towards the Italgas Group, which led to a reduction of the debt in the amount of 2,009 million euro, the net financial debt, after the payment to shareholders of the 2015 dividend (875 million euro) and the payments connected to the purchase of self-owned shares (103 million euro), this figure is reduced to 2,723 million euro, found to be 11,056 million euro.

Financial and bond debts at 31 December 2016, amounting to €11,090 million (€13,796 million at 31 December 2015), comprised the following:

Financial and bond debts are denominated in euros³³ and refer mainly to bond loans (€7,610 million, or 68.6%) and bank loans (€3,448 million, or 31.1%, including €1,182 million provided by the European Investment Bank – EIB).

The financial debts and bonds decreased by 2,706 million euro in respect to 31 December 2015. The reduction is principally due: (i) to lower bond services (-2,201 million euro) as a result of the repayment of three bonds, which arrived at their natural expiration dates respectively in the months of January, July and October 2016, with a par value of a total of 1,150 million euro and the reacquisition of bonds conducted in the realm of the Liability Management transaction concluded in the month of October 2016 for a par value, net new issues, of 1.0 billion euro³⁴; (ii) to the reduction of the bank loans (-502 million euro) mainly attributable to the entry of Italgas through acceptance, with effective date of 7 November 2016, into two loans previously issued by BEI to Snam S.p.A. (-424 million euro of par value), as well as repayments of Team Loan bank loans (-200 million euro of par value).

Long-term financial debt (€8,737 million) represented around 79% of gross financial debt (around 80% at 31 December 2015). Fixed-rate financial debts amounted to around 64% of gross financial debt.

The available liquidity and equivalents (34 million euro) principally refer to the available liquidity at the company Gasrule Insurance DAC for the exercise of insurance activity of the group (21 million euro) and the liquidity at Snam S.p.A. (12 million euro).

At 31 December 2016, Snam had unused committed long-term credit lines worth €3.2 billion.

Information on financial covenants can be found in Note 15 “Short-term financial liabilities, long-term financial liabilities and short-term portions of long-term liabilities” of the Notes to the consolidated financial statements.