Natural gas storage

Results

Total revenue amounted to €293 million, up by €17 million (6.2%) compared with the first half of 2015. Net of components offset in costs¹⁰, total revenue was €253 million, up by €17 million (7.2%) on the corresponding period of the previous year.

Regulated revenue (€292 million) comprised €257 million in fees for the natural gas storage service and €35 million in fees charged back to users relating to the natural gas transportation service provided by Snam Rete Gas S.p.A. Revenue from regulated activities, net of components that are offset in costs, amounted to €252 million, up by €16 million, equal to 6.8% compared with the first half of 2015. The increase is due to the tariff adjustment mechanisms and, specifically, to the updating of the net invested capital return rate, which increased from 6% in 2015 to 6.5% in 2016, as well as the entry into service, at the end of 2015, of the prime facilities of the Bordolano site. The increase in the rate of return is largely due to the adoption of reference parameters for the determination of WACC for 2016, calculated according to the criteria set by the Authority in Resolution 583/2015/R/com, which are better than the benchmark used to determine WACC for 2015, the first year of the fourth regulatory period for the storage service.

EBIT amounted to €179 million, up by €10 million (5.9%) compared with the first half of 2015. The higher revenues (+€17 million, net of components which are offset in costs), together with the control of management costs (+€1 million, net of components which are offset in revenues), were partly offset by increased amortisation and depreciation (-€6 million, equal to 16.7%), mainly due to the entry into service of new infrastructures.

Technical investments in the first half of 2016 totalled €51 million, a reduction of €11 million (-17.7%) compared with the first half of 2015 (€62 million).

The main investments in the development of new fields and upgrading of capacity (€31 million) mainly involved the operations carried out at the Bordolano (€20 million), Minerbio (€5 million) and Sabbioncello (€2 million) fields.

Investments in maintenance and other (€20 million) mainly relate to the operations of purchasing and launching the sound level metering equipment installations at the various Stogit stations (€5 million), the rationalisation of the Cortemaggiore plants (€4 million) and other operations carried out in the Fiume Treste fields (€2 million).

Operating review

Gas moved through the storage system

During the first half of 2016, 11.42 billion cubic metres of natural gas was moved through the storage system, a reduction of 0.54 billion cubic metres (4.5%) on the corresponding period of 2015 (11.96 billion cubic metres). The reduction was mainly attributable to lower withdrawals from storage (-0.66 billion cubic metres; -9.2%) due to the weather.

The total storage capacity at 30 June 2016, including strategic storage, was 16.3 billion cubic metres (+0.4 billion cubic metres compared 30 June 2015), of which 11.8 billion cubic metres related to available storage capacity for the entire thermal year 2016-2017 and 4.5 billion cubic metres related to strategic storage (unchanged compared with thermal year 2015-2016, as established by the Ministry of Economic Development in a notice dated 21 January 2016).

Regulation

Ministerial Decree of 25 February 2016 (Official Gazette 76 of 1 April 2016) - “Determination and allocation of modulation storage capacity for the contractual period 2016-2017”

With this decree, the Ministry of Economic Development defined the modulation storage space for thermal year 2016-2017 to be used primarily for entities supplying domestic customers, at 7,450.5 million cubic metres, plus the mining storage share not requested and allocated by the storage companies. The Decree confirmed that this storage space, together with that reserved for uniform storage of annual and multi-year duration, would be allocated by competitive auctions, with the reserve price defined by the Authority on the basis of the criteria set forth in Resolution 77/2016/R/gas.

The Decree also modified the procedures for access to and delivery of the integrated storage and regasification service, previously introduced pursuant to Article 14 of Decree-Law 1/2012. In particular, this service, for which a storage capacity of 1 billion cubic metres is reserved, requires the regasification companies and the largest storage company to coordinate in order to allow redelivery of the regasified LNG to the user directly to storage, by the end of the month following the unloading of the tanker ships. Based on the provisions of the Decree, access to the service is obtained through a competitive auction whose price has been defined by the Authority on the basis of the criteria set forth in 77/2016/R/gas, taking account of the value of the product and market developments.

Electricity, Gas and Water System Authority (AEEGSI) resolutions

Resolution 323/2016/R/gas - “Provisions on settlement relating to storage services for the 2016- 2017 thermal year”

Through this resolution, published on 17 June 2016, the Authority regulated the methods for the thermal year 2016-2017 through which any differences are neutralised, in terms of revenue flows, between what is paid to the storage companies based on regulated tariffs and what is received following tenders for capacity allocation.

With regard to the parameter pursuant to Article 11 of Annex A of resolution 531/2014/R/gas “Regulation criteria for natural gas storage service tariffs for the 2015-2018 period” - (RTSG), with regard to the level of cover for the revenue share attributable to the additional return on net invested capital for incentivised investments that came into operation in the previous regulation periods, a preliminary investigation was launched aimed at defining the criteria for establishing its value for future years, with the purpose of encouraging storage companies to follow more efficient behaviour both in the management of allocation procedures and in the provision of the storage service.

Pending the outcome of the investigation, which will be concluded in time for the approval of the revenues for 2017, a value of 1 for the parameter for 2016 has been confirmed.

Resolution 418/2016/R/gas - “Approved the definitive allowed revenues for 2016 for storage service”

With this resolution, published on 22 July 2016, the Authority approved the allowed revenues for storage service relating to 2016 for Stogit. Storage allowed revenues for 2016 has been set at 503.5 million euro. RAB for natural gas storage business has been set equal to 4.0 billion euro.